Jake opens a credit card with 18% annual interest compounded monthly. If he charges $800 on the card and never pays it off, how
much will he owe the credit card company in 2
years? Round to the nearest cent.
1 answer:
<h3>
Answer: $1,143.60</h3>
Work Shown:
A = P*(1+r/n)^(n*t)
A = 800*(1+0.18/12)^(12*2)
A = 1,143.60224954321
A = 1,143.60
Notes:
- P = 800 is the principal. It is the amount loaned to Jake.
- r = 0.18 is the decimal form of the 18% interest rate
- n = 12 because we're compounding monthly, i.e. 12 times a year
- t = 2 = number of years
- For more information, check out the compound interest formula.
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